INDEX LINKED GILTS UNIT TRUST FOR THE YEAR ENDED 31 MARCH 2014
Manager St. James's Place Unit Trust Group Limited PO Box 9034, Chelmsford, CM99 2XA United Kingdom Freephone: 0800 027 1031 (Authorised and regulated by the Financial Conduct Authority) Directors of the Manager D. C. Bellamy A. M. Croft I. S. Gascoigne D. J. Lamb Secretary of the Manager St. James's Place Administration Limited Investment Adviser BlackRock Investment Management (UK) Limited 12 Throgmorton Avenue London, EC2N 2DL United Kingdom (Authorised and regulated by the Financial Conduct Authority) Trustee BNY Mellon Trust & Depositary (UK) Limited 160 Queen Victoria Street London, EC4V 4LA United Kingdom (Authorised and regulated by the Financial Conduct Authority) Registrar International Financial Data Services (UK) Limited IFDS House St. Nicholas Lane Basildon, SS15 5FS United Kingdom (Authorised and regulated by the Financial Conduct Authority) Independent Auditor PricewaterhouseCoopers LLP Atria One 144 Morrison Street Edinburgh, EH3 8EX United Kingdom Prospectus and Manager's Reports Copies of the up to date Prospectus (Scheme Particulars) and latest Manager's Report and Financial Statements for the range of St. James's Place Unit Trusts can be requested from a member of the St. James's Place Partnership or, at any time during normal business hours, from the Administration Centre at PO Box 9034, Chelmsford CM99 2XA. Freephone: 0800 027 1031 1
Report of the Manager During the year under review, 1 April 2013 to 31 March 2014, the St. James's Place Index Linked Gilts Unit Trust Income unit offer price fell by 6.4% from 106.0p to 99.20p and the Accumulation unit offer price (in which revenue is reflected in the price rather than distributed) fell by 5.4% from 106.9p to 101.1p. On the 28 May 2014, the latest available date before the printing of this report, the Income unit offer price was 99.48p and the Accumulation unit offer price was 101.7p. The estimated yield was 1.63%. The Trust's Performance The performance of the Trust since its launch in April 2012 and over the year under review is shown below, together with figures for the most commonly quoted indices in comparable markets where the major proportion of the Trust has been invested. St. James's Place Index Linked Gilts Unit Trust Income units (offer to offer) Accumulation units (offer to offer) Indices - actual Citi UK Inflation-Linked Secutities Index (GBP) Source: Lipper for Fund returns 10/04/12 to 31/03/13 to 31/03/14 31/03/14 % change % change -0.8-6.4 +1.1-5.4 +6.2-4.1 REMEMBER THAT THE PRICE OF UNITS AND REVENUE FROM THEM MAY GO DOWN AS WELL AS UP. PLEASE BE AWARE THAT PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE. Investment Adviser's Comments Real yields on index-linked bonds increased sharply during the first half of the reporting period and yields on conventional gilts also increased although less so. The increase in real yields was concentrated in the three month period to the end of June 2013, driven by the expectation that the Fed would begin early tapering. However, there was no change to policy, prompting a small decline in yields in the second half of September. Data releases showed an improvement in economic growth in the second quarter of 2013 and inflation was little changed between March and September. The Bank of England (BoE) unveiled its forward guidance for interest rates in August announcing its parameters for a rate hike. These were based on the level of unemployment, the path of inflation and low interest rates not risking financial stability. Real yields on index-linked gilts rose across all maturities in the final quarter of 2013. Domestic economic data releases were generally stronger than expected in the fourth quarter of 2013. Consequently, the BoE revised up its growth forecasts and revised down inflation in its November Inflation Report. Index-linked bonds rallied across most maturities in the first quarter of 2014. UK inflation cooled, falling below the BoE s 2% target. The first estimate of GDP showed growth of 0.7% for the final three months of 2013. Unemployment remained stable in January. The BoE revised up its growth forecasts and lowered its inflation projections in its February Inflation Report. The BoE maintained its policy but adjusted its forward guidance to take account of a broader range of economic indicators. BlackRock Investment Management (UK) Limited 17 April 2014 2
Performance Record The St. James's Place Index Linked Gilts Unit Trust was first offered on 10 April 2012 at an offer price of 100.00p per unit. Unit Price History Calendar year 2012 2013 2014* Income Accumulation Highest Lowest Highest Lowest Offer Bid Offer Bid p p p p 102.00 95.71 102.6 95.97 106.10 93.65 107.3 94.95 99.50 93.19 101.4 94.98 Distributions The record of net distributions paid/payable per unit is shown below: Income Accumulation Net revenue distributed Net revenue distributed per 1,000 per 1,000 Invested Invested per unit at 10/04/12 per unit at 10/04/12 Calendar year p p 2012 0.891 8.91 0.894 8.94 2013 0.970 9.70 0.982 9.82 2014* 0.270 2.70 0.275 2.75 Net Asset Values Income Year ended March 2013 2014 Accumulation Year ended March 2013 2014 Market NAV NAV Units in Issue of Class per Unit '000 p 6,355,614 6,402 100.73 12,556,933 11,820 94.13 Market NAV NAV Units in Issue of Class per Unit '000 p 62,510,269 63,674 101.86 94,317,461 90,748 96.22 Ongoing Charges Figure The Ongoing Charges Figure for the year ended 31 March 2014 was 1.18% (31 March 2013: 1.22%). The Ongoing Charges Figure ('OCF') is the total expenses paid by the Trust in the year against its average net asset value. It excludes the cost of buying or selling assets for the Trust (unless these assets are shares of another trust). The OCF can fluctuate as underlying costs change. Risk and Reward Profile The synthetic risk and reward indicator for the St. James s Place Index Linked Gilts Unit Trust, as disclosed in its most recent Key Investor Information Document (KIID), is a 3. It was calculated using performance data up to 3 February 2014. The risk category is recalculated weekly, in September 2013 the SRRI changed from a category 4 to a category 3. * To 31 March 2014 3
Investment Assets as at 31 March 2014 Security Holdings Market Value 000 % of Net Assets UK GOVERNMENT INDEX LINKED GILTS (99.34%) 101,532 98.99 UK Treasury Index Linked 2.5% 26/07/2016 8,994,850 30,419 29.66 UK Treasury Index Linked 1.25% 22/11/2017 14,022,410 20,224 19.72 UK Treasury Index Linked 0.125% 22/11/2019 2,120,000 2,283 2.23 UK Treasury Index Linked 2.5% 16/04/2020 2,695,880 9,790 9.54 UK Treasury Index Linked 1.875% 22/11/2022 6,509,410 9,664 9.42 UK Treasury Index Linked 0.125% 22/03/2024 4,144,000 4,476 4.36 UK Treasury Index Linked 2.5% 17/07/2024 2,822,950 9,277 9.04 UK Treasury Index Linked 1.25% 22/11/2027 5,831,000 9,001 8.78 UK Treasury Index Linked 0.125% 22/03/2029 5,895,000 6,398 6.24 Investment assets 101,532 98.99 Total other assets (net) 1,036 1.01 Net assets 102,568 100.00 Comparative figures shown in brackets relate to 31 March 2013. All investments are approved securities as defined in the Collective Investment Schemes sourcebook unless otherwise stated. UK Government Gilts are all rated as investment grade. 4
Material Portfolio Changes Cost Purchases 000 UK Treasury Index Linked 2.5% 26/07/2016 17,622 UK Treasury Index Linked 1.25% 22/11/2017 11,896 UK Treasury Index Linked 0.125% 22/03/2029 6,363 UK Treasury Index Linked 1.875% 22/11/2022 5,046 UK Treasury Index Linked 2.5% 17/07/2024 4,656 UK Treasury Index Linked 2.5% 16/04/2020 4,269 UK Treasury Index Linked 0.125% 22/03/2024 4,170 UK Treasury Index Linked 1.25% 22/11/2027 4,154 UK Treasury Index Linked 2.5% 16/08/2013 2,851 UK Treasury Index Linked 0.125% 22/11/2019 2,738 Proceeds Sales 000 UK Treasury Index Linked 2.5% 16/08/2013 13,775 UK Treasury Index Linked 1.875% 22/11/2022 3,074 UK Treasury Index Linked 2.5% 17/07/2024 2,770 UK Treasury Index Linked 1.25% 22/11/2027 2,368 UK Treasury Index Linked 2.5% 16/04/2020 2,392 UK Treasury Index Linked 0.125% 22/03/2024 1,023 UK Treasury Index Linked 2.5% 26/07/2016 805 UK Treasury Index Linked 1.25% 22/11/2017 480 UK Treasury Index Linked 0.125% 22/11/2019 460 5
Statement of the Manager's Responsibilities in relation to the Financial Statements of the Trust The rules in the Financial Conduct Authority's Collective Investment Schemes Sourcebook ("the Rules") require the Manager to prepare Financial Statements for each annual accounting period which give a true and fair view of the financial position of the Trust as at the end of the year and of the net revenue and the net capital losses on the property of the Trust for the year then ended. In preparing the Financial Statements the Manager is required to: select suitable accounting policies and then apply them consistently; make judgements and accounting estimates that are reasonable and prudent; comply with the requirements of the Statement of Recommended Practice relating to Authorised Funds and the Trust Deed; follow applicable UK Accounting Standards (UK Generally Accepted Accounting Practice); and prepare Financial Statements on the going concern basis unless it is inappropriate to presume that the Trust will continue in operation. The Manager is responsible for keeping proper accounting records and for the management of the Trust in accordance with its Trust Deed, Prospectus and the Rules. The Manager has a general responsibility for taking such steps as are reasonably open to it to prevent and detect fraud and other irregularities. Directors' Certificate This report is certified in accordance with the requirements of the rules in the Financial Conduct Authority's Collective Investment Schemes Sourcebook. Directors A. M. Croft London D. J. Lamb 29 May 2014 6
Statement of Trustee's Responsibilities The Trustee is under a duty to take into custody and to hold the property of the Trust in trust for the holders of units. It is also the duty of the Trustee to enquire into the conduct of the Manager in the management of the Trust and to ensure that the Trust is managed in accordance with all applicable rules and restrictions in each annual accounting period, and to report thereon to unitholders. Report of the Trustee In our opinion, the Manager has managed the Trust, in all material aspects, during the period covered by this Report in accordance with the investment and borrowing powers and the restrictions applicable to the Trust and otherwise in accordance with the provisions of the Trust Deed and the rules in the Financial Conduct Authority's Collective Investment Scheme provisions of the Sourcebook. For and on behalf of: BNY Mellon Trust & Depositary (UK) Limited London 29 May 2014 7
Independent Auditors Report to the Unitholders of St. James s Place Index Linked Gilts Unit Trust Our opinion In our opinion the financial statements, defined below: give a true and fair view of the financial position of the Trust as at 31 March 2014 and of the net revenue and the net capital losses of the scheme property of the Trust for the year then ended; and have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice, the Statement of Recommended Practice for Authorised Funds, the Collective Investment Schemes sourcebook and the Trust Deed. This opinion is to be read in the context of what we say in the remainder of this report. What we have audited The financial statements of St. James s Place Index Linked Gilts Unit Trust (the Trust ), which are prepared by St. James s Place Unit Trust Group Limited (the Authorised Fund Manager ), comprise: the balance sheet of the Trust as at 31 March 2014; the statement of total return of the Trust for the year then ended; the statement of change in net assets attributable to unitholders of the Trust for the year then ended; the notes to the Trust s financial statements, which include a summary of significant accounting policies and other explanatory information; and the distribution tables. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), the Statement of Recommended Practice Financial Statements of Authorised Funds issued by the Investment Management Association (the Statement of Recommended Practice for Authorised Funds ), the Collective Investment Schemes sourcebook and the Trust Deed. In applying the financial reporting framework, the Authorised Fund Manager has made a number of subjective judgements, for example in respect of significant accounting estimates. In making such estimates, they have made assumptions and considered future events. 8
What an audit of financial statements involves We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) ( ISAs (UK & Ireland) ). An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Trust s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Authorised Fund Manager; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Annual Report (the Annual Report ) to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Opinions on matters prescribed by the Collective Investment Schemes sourcebook In our opinion: we have obtained all the information and explanations we consider necessary for the purposes of the audit; and the information given in the Authorised Fund Manager s Report for the financial year for which the financial statements are prepared is consistent with the financial statements. Other matters on which we are required to report by exception Propriety of accounting records and information and explanations received Under the Collective Investment Schemes sourcebook we are required to report to you if, in our opinion: proper accounting records have not been kept; or the financial statements are not in agreement with the accounting records and returns. We have no exceptions to report arising from this responsibility. 9
Responsibilities for the financial statements and the audit Our responsibilities and those of the Authorised Fund Manager As explained more fully in the Authorised Fund Manager s Responsibilities Statement set out on page 6, the Authorised Fund Manager is responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and ISAs (UK & Ireland). Those standards require us to comply with the Auditing Practices Board s Ethical Standards for Auditors. This report, including the opinions, has been prepared for and only for the Trust s unitholders as a body in accordance with paragraph 4.5.12 of the Collective Investment Schemes sourcebook and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors Edinburgh 29 May 2014 The maintenance and integrity of the St. James s Place website is the responsibility of the Fund Manager; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. 10
Statement of Total Return for the year ended 31 March 2014 Income Net capital (losses)/gains Revenue Expenses Finance costs: Interest Net revenue before taxation Taxation Net revenue after taxation 01/04/13 to 31/03/14 10/04/12 to 31/03/13 Notes 000 000 000 000 2 (4,545) 2,873 3 1,310 566 4 (1,039) (412) 6 - - 271 154 5 - - 271 154 Total return before distributions (4,274) 3,027 Finance costs: Distributions 6 (1,186) (512) Change in net assets attributable to unitholders from investment activities (5,460) 2,515 Statement of Change in Net Assets Attributable to Unitholders for the year ended 31 March 2014 01/04/13 to 31/03/14 10/04/12 to 31/03/13 000 000 000 000 Opening net assets attributable to unitholders 70,076 - Assets transferred from St. James's Place Index Linked Gilts Exempt Managed Fund - 3,961 Assets transferred from St. James's Place Index Linked Gilts Offshore Managed Fund - 2,026 Movement due to creation and cancellation of units: Amounts receivable on creation of units 44,291 63,120 Amounts payable on cancellation of units (7,235) (2,005) 37,056 61,115 Dilution levy charged 1 - Change in net assets attributable to unitholders from investment activities (see above) (5,460) 2,515 Retained distribution on accumulation units 895 459 Closing net assets attributable to unitholders 102,568 70,076 The prices per unit as at 31 March 2014 (unaudited) were: Income units Accumulation units Bid Offer p p 94.40 99.20 96.22 101.10 11
Balance Sheet as at 31 March 2014 Assets Investment assets Debtors Cash and bank balances Total other assets Total assets 31/03/14 31/03/13 Notes 000 000 000 000 101,532 69,610 8 1,158 1,596 449 82 1,607 1,678 103,139 71,288 Liabilities Creditors 9 (537) (1,199) Distribution payable on income units (34) (13) Total liabilities (571) (1,212) Net assets attributable to unitholders 102,568 70,076 12
Notes to the Financial Statements for the year ended 31 March 2014 1. Accounting and Distribution policies (a) Basis of accounting The Financial Statements have been prepared under the historical cost basis, as modified by the revaluation of investments, in compliance with the Financial Conduct Authority's Collective Investment Schemes Sourcebook. They have been prepared in accordance with applicable UK accounting standards and in accordance with the Statement of Recommended Practice (SORP) for Financial Statements of Authorised Funds issued by the IMA in October 2010 (IMA SORP 2010). (b) Revenue Interest on deposits is accounted for on an accruals basis. Revenue on interest bearing assets is recognised on an effective interest rate basis. (c) Expenses All expenses of the Trust are recognised on an accruals basis and are deducted from revenue with the exception of Investment Adviser's fee, handling charges and stamp duty reserve tax which are deducted from capital. The manager has agreed that 100% of the annual management charge and all other expenses are to be transferred to capital for the purpose of calculating the distribution, as permitted by the Collective Investment Schemes Sourcebook. (d) Valuation of investments Listed investments have been valued at bid market value at 12.00 midday on 31 March 2014 (28/03/13: bid market value at 12.00 midday), net of any accrued interest which is included in the Balance Sheet as a revenue related item. (e) Foreign exchange Assets and liabilities have been translated into sterling at the exchange rates prevailing at the Balance Sheet date. Transactions involving foreign currencies are converted at the rate ruling on the date of the transaction. (f) Taxation Provision is made for corporation tax at the current rate on the excess of taxable revenue over allowable expenses. Deferred tax is provided for on the liability method on all timing differences. A deferred tax asset is only recognised to the extent that a timing difference will be of future benefit. (g) Distribution policy Distributions are made in respect of quarters ended 28 February, 31 May, 31 August and 30 November. At the end of the accounting period all remaining revenue, less revenue expenses and taxation, will be attributable to unitholders. In the case of income unitholders this will be paid as a distribution. In the case of accumulation unitholders the distribution will be reinvested. The Fund satisfied the qualifying investments test of Section 468 L Income and Corporation Taxes Act 1988 throughout the year. All distributions made are therefore made as interest distributions. (h) Equalisation Equalisation applies only to units purchased during the distribution period. It is the accrued revenue element of the purchase price of all such units and is refunded to holders of these units as a return of capital. Being capital it is not liable to income tax, but must be deducted from the cost of units for capital gains tax purposes. 13
Notes to the Financial Statements (continued) 2. Net capital (losses)/gains 01/04/13 to 31/03/14 10/04/12 to 31/03/13 000 000 Non-derivative securities (4,541) 2,877 Handling charges (4) (4) Net capital (losses)/gains (4,545) 2,873 3. Revenue 01/04/13 to 31/03/14 10/04/12 to 31/03/13 000 000 Bank interest 1 - Interest on debt securities 1,309 566 Total revenue 1,310 566 4. Expenses 01/04/13 to 31/03/14 10/04/12 to 31/03/13 000 000 Payable to the Manager Management charge 871 341 Payable to the Trustee Trustee's fees 9 3 Other expenses Audit fee 13 9 Investment administration fee 10 8 Registrar's fees 87 34 Safe custody fees 1 - Tax & compliance fee 4 - Investment adviser's fee 44 17 159 68 Total expenses 1,039 412 5. Taxation 01/04/13 to 31/03/14 *10/04/12 to 31/03/13 000 000 (a) Analysis of charge in year: There is no corporation tax charge in the current year or prior period. (b) Factors affecting current tax charge for the year: The tax assessed for the year is lower than the standard rate of corporation tax in the UK for an authorised unit trust of 20% (2013: 20%). The differences are explained below: Net revenue before taxation 271 154 Corporation Tax at 20% (2013: 20%) 54 31 Effects of: Tax deductible interest distributions (54) (31) (c) Current tax charge for year (note 5a) *Prior year figures have been restated. Deferred taxation: There is no provision required for deferred taxation at the balance sheet date. - - 14
Notes to the Financial Statements (continued) 6. Finance costs Distributions and interest The distributions take account of revenue received on the creation of units and revenue deducted on the cancellation of units and comprises: 01/04/13 to 31/03/14 10/04/12 to 31/03/13 000 000 First interim distribution 216 58 Second interim distribution 210 140 Third interim distribution 281 158 Final distribution 293 147 Revenue tax withheld 237 102 1,237 605 Add: Revenue deducted on cancellation of units 13 2 Deduct: Revenue received on creation of units (64) (95) Net distributions for the year 1,186 512 Interest - - Total finance costs 1,186 512 7. Movement between net revenue and net distributions 01/04/13 to 31/03/14 10/04/12 to 31/03/13 000 000 Net revenue after taxation 271 154 Management charge 871 341 Other expenses paid out of capital 44 17 Net distributions for the year 1,186 512 8. Debtors 31/03/14 31/03/13 000 000 Sales awaiting settlement - 204 Amounts receivable for creation of units 736 1,109 Accrued revenue 422 283 Total debtors 1,158 1,596 9. Creditors 31/03/14 31/03/13 000 000 Purchases awaiting settlement 321 1,058 Amounts payable for cancellation of units 26 - Accrued expenses 74 84 Income tax payable 116 57 Total creditors 537 1,199 10. Units in issue At the year end there were Income units of 12,556,933 (31/03/13: 6,355,614) and Accumulation units of 94,317,461 (31/03/13: 62,510,269). 15
Notes to the Financial Statements (continued) 11. Related party transactions St. James's Place Unit Trust Group Limited and BNY Mellon Trust & Depositary (UK) Limited together with their associates are related parties and regarded as controlling parties by virtue of having the ability to act in respect of operations of the Trust. The Manager's service charge paid to St. James's Place Unit Trust Group Limited is shown in note 4 and details of the value of units created and cancelled by St. James's Place Unit Trust Group Limited are shown in the Statement of Change in Net Assets Attributable to Unitholders. The net balances due from St. James's Place Unit Trust Group Limited at the year end in respect of these transactions was 709,547 (31/03/13: 1,060,749). Trustee's fees and interest payable to the BNY Mellon Trust & Depositary (UK) Limited and their associates are shown in notes 4 and 6 respectively. The net balances due from BNY Mellon Trust & Depositary (UK) Limited and their associates at the year end in respect of these transactions was nil (31/03/13: 501). The Manager, St. James's Place Unit Trust Group Limited, is a subsidiary of St. James's Place Wealth Management Group plc ('SJPWMG'). Two fellow subsidiaries of SJPWMG, St. James's Place International plc and St. James's Place UK plc, invest some of their life and pension policyholders' funds into the St. James's Place Index Linked Gilts Unit Trust. The value of these investments at the year end was 51,155,941 (31/03/13: 42,900,036). 12. 13. Capital commitments and contingent liabilities On 31 March 2014, the Trust had no capital commitments (31/03/13: nil) and no contingent liabilities (31/03/13: nil). Financial instruments In accordance with the investment objectives, as stated on page 20, the Trust holds certain financial instruments. These comprise: Interest bearing assets; and Cash (including overdrafts) and short-term debtors and creditors that arise directly from its operations. 14. Risk management The Manager s objectives in managing investment risk are to ensure that the investment profile of the Trust is consistent with its stated investment objectives and risk profile, and to ensure appropriate liquidity. Day to day responsibility for managing investment risk is delegated to the Investment Adviser, who is required to manage the Trust in accordance with FCA regulations, the Prospectus and the terms of their Investment Management Agreement with the Manager. The Manager monitors the activities of the Investment Adviser, through a variety of mechanisms including the following: Initial and ongoing due diligence of Investment Adviser investment and risk management procedures including on site reviews; Periodic reviews of the investments held by the Trust and their compliance with investment objectives and liquidity requirements; and Ongoing review of the investment performance of the Trust against appropriate benchmarks. The main risks arising from the Trust's financial instruments are market price risk, interest rate risk, credit risk and liquidity risk. The Manager's policies for managing these risks are summarised below. These policies have remained unchanged since the beginning of the year to which these financial statements relate. 16
Notes to the Financial Statements (continued) (a) Market price risk Market price risk represents the potential loss the Trust might suffer through holding market positions in the face of price movements. The Manager has delegated the investment management of the portfolio to an external Investment Adviser who determines the asset allocation and minimises the risk associated with particular countries or industry sectors, whilst continuing to follow the Trust s investment objectives. The Manager has the responsibility for monitoring the portfolio to ensure compliance with the investment objectives and that an acceptable risk reward profile is maintained. (b) Interest rate risk Interest rate risk arises due to variability in market interest rates. Some investments held by the Trust, such as Gilts, are highly sensitive to fluctuations in market interest rates. Interest receivable on bank deposits or payable on bank overdraft positions will also be affected by these fluctuations. This risk is managed by ensuring that the Trust s assets are diversified. The interest rate risk profile of the Trust's financial assets and liabilities at 31 March 2014 was: Floating rate financial assets Fixed rate financial assets Fixed rate weighted average interest rate Fixed rate weighted average period for which rate is fixed Financial assets not carrying interest Currency Total 000 000 % Years 000 000 31/03/14 GBP 449 101,532 (0.94) 7.45 587 102,568 31/03/13 GBP 82 69,610 (1.89) 7.32 384 70,076 (d) Credit risk Credit risk occurs where there is a risk associated with the uncertainty of a counterparty s ability to meet its obligations. This risk is managed by reviewing the counterparty s credit rating, at the time of purchase and on an ongoing basis, and ensuring that the portfolio is sufficiently diversified. The impact of movements in credit rating and spread, and their effect on market prices, is considered to be part of market price risk, which is discussed above. The Trust s investments and cash are held on its behalf by State Street Bank and Trust Company (acting as agent), the custodian to the Trust, and its appointed sub custodians. Bankruptcy or insolvency of the custodian or its sub custodians may cause the Trust s rights with respect to securities to be delayed. This risk is managed through ongoing monitoring of the custodian and periodic reviews of its procedures for selecting and monitoring sub custodians, together with ad hoc reviews of custodian and sub custodian credit ratings. Certain transactions in securities that the Trust enters into expose it to the risk that the counterparty will not deliver the investment (purchase) or cash (sale) after the fund has fulfilled its responsibilities. The external Investment Adviser selects acceptable counterparties through which investments are bought and sold. The Manager has responsibility for monitoring the process by which these counterparties are selected to minimise risk. Where the Investment Managers make an investment in a bond with credit risk, that credit risk is assessed and then compared to the prospective investment return of the security in question. The risk is managed by reviewing the credit ratings of those bonds at time of purchase and on an ongoing basis. 17
Notes to the Financial Statements (d) (e) (f) Liquidity risk (continued) Liquidity risk arises where liabilities cannot be met when they fall due or can only be met at an uneconomic price. For instance, this could arise if the Trust faces significant redemptions in a short period of time. In order to manage this risk the manager monitors the Trust with the aim of ensuring that it contains diversified liquid assets, that the Trust possesses sufficient liquidity for the purpose of meeting the redemption of units, and that the Trust has sources of borrowing available to it. Derivative risk The Manager may use derivative instruments to hedge the value of the investment portfolio against market, currency and stock specific risk through investment in warrants, options, forwards and futures. The purpose of the financial instruments is efficient portfolio management. In particular futures may be used to implement the investment policy in a timely manner and to manage market risk arising from the time lag between funds being receivable or payable by the Trust and investment and disinvestment in underlying securities. As the trust is not considered a sophisticated fund, the manager uses the commitment approach to measure the global exposure to derivatives. No such derivatives were held by the Trust in the year to 31 March 2014. Maturity profile of financial liabilities All financial liabilities of the Trust at the year end are due to settle in one year or less, or on demand. (g) Fair value of financial assets and liabilities There is no material difference between the value of the financial assets and liabilities, as shown in the Balance Sheet, and their fair values. 15. Portfolio transaction costs There were no transactions costs incurred during the year to 31 March 2014. 18
Distribution Tables Distributions in pence per unit Group 1 First interim Units purchased prior to 1 April 2013 Second interim Units purchased prior to 1 July 2013 Third interim Units purchased prior to 1 October 2013 Final Units purchased prior to 1 January 2014 Group 2 First interim Units purchased on or after 1 April 2013 to 30 June 2013 Second interim Units purchased on or after 1 July 2013 to 30 September 2013 Third interim Units purchased on or after 1 October 2013 to 31 December 2013 Final Units purchased on or after 1 January 2014 to 31 March 2014 Income Gross revenue Income tax Net revenue Equalisation Distributions paid to/ payable 31/05/14 Distributions paid to 31/05/13 Group 1 (p) (p) (p) (p) (p) (p) First interim 0.324 0.065 0.259-0.259 0.238 Second interim 0.279 0.056 0.223-0.223 0.356 Third interim 0.346 0.069 0.277-0.277 0.297 Final 0.338 0.068 0.270-0.270 0.211 Group 2 (p) (p) (p) (p) (p) (p) First interim 0.163 0.033 0.130 0.129 0.259 0.238 Second interim 0.126 0.025 0.101 0.122 0.223 0.356 Third interim 0.181 0.036 0.145 0.132 0.277 0.297 Final 0.156 0.031 0.125 0.145 0.270 0.211 Accumulation Gross revenue Income tax Net revenue Equalisation Distributions paid to/ payable 31/05/14 Distributions paid to 31/05/13 Group 1 (p) (p) (p) (p) (p) (p) First interim 0.327 0.065 0.262-0.262 0.238 Second interim 0.283 0.057 0.226-0.226 0.357 Third interim 0.352 0.071 0.281-0.281 0.299 Final 0.344 0.069 0.275-0.275 0.213 Group 2 (p) (p) (p) (p) (p) (p) First interim 0.164 0.033 0.131 0.131 0.262 0.238 Second interim 0.128 0.026 0.102 0.124 0.226 0.357 Third interim 0.184 0.037 0.147 0.134 0.281 0.299 Final 0.166 0.033 0.133 0.142 0.275 0.213 19
General Information The Trust St. James's Place Index Linked Gilts Unit Trust is an authorised Unit Trust scheme under section 243 of the Financial Services and Markets Act (2000) and is constituted by a Trust Deed dated 12 March 2012. The Unit Trust is subject to the rules of the Financial Conduct Authority's Collective Investment Scheme Sourcebook and is classified as a UCITS Scheme. The Trust Manager The Manager of the Trust is St. James's Place Unit Trust Group Limited which is a member of the IMA and is authorised and regulated by the Financial Conduct Authority. Investment Objectives The investment objective of the Scheme is to provide a combination of growth and income, by investing primarily in a portfolio of UK index linked gilts. The Scheme may also invest in other, non-uk, highly rated government backed index linked securities, and is also permitted to invest in other types of transferable securities, units and/or shares in collective investment schemes, money market instruments, cash and near cash, deposits, and derivatives and forward transactions for the purposes of efficient portfolio management (including hedging). Please note that on 3 February 2014 the Scheme was converted from a Non-UCITS Retail Scheme to a UCITS scheme. The conversion removed the Scheme s ability to invest in unregulated collective investment schemes. It is the Manager's intention that the assets of the Unit Trust will be invested so that the Unit Trust will be eligible for inclusion in an ISA. Non-Resident Unitholders - European Union Savings Directive Unitholders resident in most European Union countries (not UK) should be aware that the Trust is covered by the European Union Savings Directive, which came into force on 1 July 2005. The Manager is required to identify and report your distributions and repurchase transactions to the UK tax authorities, who are in turn required to pass this information to most other European Union national tax authorities. Unit Dealings Dealings on the Trust take place on a daily basis. Purchase or sale instructions can be made by telephone or in writing to St. James's Place Unit Trust Group Limited, PO Box 9034, Chelmsford, CM99 2XA, United Kingdom, freephone: 0800 027 1031. The Manager adopts a policy of forward pricing, i.e. the order will be transacted on the dealing day following receipt of the client's instructions, or if received before noon, on that dealing day. In the case of telephone purchases of units from the Manager, settlement must be by return of post after receipt of the contract note. In the case of telephone redemptions, the proceeds will not become payable until the receipt at the Administration Centre of a written request. A contract note confirming the subscription or redemption price and the number of units involved will be forwarded, together with a cancellation notice, where appropriate, on the next business day. The most recent issue and redemption prices will be published on the Manager's website: www.sjp.co.uk and are available by calling the Administration Centre on 0800 027 1031. Minimum Investment The minimum lump sum investment is 1,500, thereafter the minimum additional investment is 1,000. The minimum monthly investment is 150 and the minimum monthly increment is 50. The minimum annual investment is 1,500 and the minimum annual increment is 500. 20
General Information (continued) Management Charges The Trust Deed permits the following management charges which are receivable by the Manager: (a) (b) A Preliminary Charge of 5 per cent which is included in the offer price of the Units. An Annual Management Charge at a rate of 1 per cent of the value of the Trust. Income Distributions Income distributions are made quarterly on or before the 28 February, 31 May, 31 August and 30 November. Accumulation Distributions Revenue due to accumulation unitholders is reflected in the price of their units. Tax Vouchers Income unitholders that receive income distributions by direct credit and accumulation unitholders (where the distribution income is reinvested) receive an annual consolidated tax voucher in May with all the relevant payment and tax information required to complete a tax return. Tax vouchers will be enclosed if income unitholders receive payment by cheque. Report A report is sent semi-annually to all unitholders on or before 31 May and 30 November. Capital Gains Tax The Trust is not liable to tax on capital gains and any individual holding units will not be liable to capital gains tax unless the total chargeable gains for the tax year 2014/2015 exceed 11,000 (2013/2014 10,900). To calculate capital gains on accumulation units, the total amount of reinvested net revenue (shown on the annual tax credit vouchers) should be added to the base cost of the units purchased. Unitholders should consult their professional advisers for any advice regarding their tax position. 21
St. James s Place Unit Trust Group Ltd is authorised and regulated by the Financial Conduct Authority. St. James s Place Unit Trust Group Ltd Registered Office: St. James s Place House, 1 Tetbury Road, Cirencester, Gloucestershire, GL7 1FP, United Kingdom. Registered in England Number 947644. Perivan Financial Print 232503 Index Linked Gilts (5/14)